Engagement fees as down payment?

by a searcher from The University of Chicago - Booth School of Business

2 years ago

We're negotiating an LOI and we just had a seller ask if we could include an "engagement fee" which he described as a down payment. His logic is that he will be sharing all of the company secrets and he needs some compensation for the risk that we won't go and acquire a competitor, etc. Have any of you ever heard of something like this? Ideas for alternatives>

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investor from University of British Columbia

I wouldn't do this but I also get where they're coming from, esp if they haven't gone through the process before. Instead of ripping into them, try educating them about the process and it's norms.

2 years ago | like reply | 0 likes

searcher from University of Kentucky

That is a red flag for me. I would mention that is off-market, or unheard of. Then see what the seller does, If they remain in the same position, I would walk away from the deal.

2 years ago | like reply | 0 likes

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